“We will evaluate the applications carefully and expeditiously, applying the principles set out in the revised guideline. We hope to be in a position to start granting licenses to virtual banks towards the end of this year or in the first quarter of next year,” HKMA Chief Executive Norman Chan Tak-lam said in an authority statement on Wednesday.

More than 50 Hong Kong, Chinese mainland and overseas enterprises have enquired and indicated interest to the HKMA over virtual bank license applications

More than 50 Hong Kong, Chinese mainland and overseas small to medium sized companies and large-scale enterprises have enquired and indicated interest to the HKMA over virtual bank license applications. These companies have a diverse background– some are traditional banks while others are pure technology companies.

Of the 50 companies, some have already submitted initial business plans to the HKMA. The business plans contain information regarding the holding parent companies’ businesses and the shareholder background. Most of these submitted business plans relate to the provision of virtual banking services connected to chatbots and social media platforms rather than the pure website platform.

Virtual banks, if they can successfully obtain their licenses, are expected to provide retail banking services such as deposit-taking and lending as well as banking services to small and medium enterprises. Investment-product sales will come in the second stage.

“We will regularly gauge market development to determine whether we need to cap the number of virtual bank licenses. Currently we do not have any plan to cap the number of licenses,” HKMA Deputy Chief Executive Arthur Yuen Kwok-hang said at the Wednesday press conference.

In processing the applications, HKMA will consider whether the applicants have sufficient financial, technological and other relevant resources to operate a virtual bank, whether they have a credible and viable business plan, whether they have developed or can develop an appropriate information technology platform to support their business plans, and whether they are ready to commence services soon after a license is granted.

The HKMA conducted a public consultation on revising guidelines regarding authorization of virtual banks between February 6 and March 15 this year and the city’s monetary affairs regulator received 25 responses from market players.

After taking account of market response, the HKMA reiterated several licensing requirements. For promoting inclusive finance in Hong Kong, virtual banks should not impose any minimum-balance requirements or low-balance fees on customers. Virtual-bank applicants are expected to develop an exit plan. The minimum paid-up capital requirement of HK$300 million, which is stipulated in the Banking Ordinance and is applicable to all licensed banks, also applies to virtual-bank applicants.

The HKMA in September last year unveiled the seven initiatives to promote smart-banking services in Hong Kong –virtual banking was one of the initiatives.

A virtual bank is defined as a bank which primarily delivers retail banking services through the internet or other electronic channels instead of physical branches.

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